BY ANTONY CURRIE

Investors can get a natural kick out of water. Usually it’s huge, costly and time-consuming infrastructure projects that dominate plans for solving the world’s water issues. But nature-based solutions such as restoring forests and soil can yield quicker results and generate decent returns.

The United Nations is trying to address this imbalance by putting the topic at the heart of Thursday’s World Water Day. It’s a pretty simple concept.

First, consider that 75 percent of freshwater depends on forests, according to investor climate lobby group CDP. Chopping those down to build cattle farms, as often happens is Brazil, can reduce the ability of forests to store water underground and upset rainfall patterns. Such factors contributed to Sao Paulo’s water crisis three years ago and remain a concern.

Some 2 billion hectares – about twice the size of the United States – of what were once forests are now low-value land ripe for restoration. Actually doing so “justifies itself on good economics and good finance,” according to Andrew Steer, chief executive of the World Resources Institute. In addition to improving water supplies, it would also curb the growth of climate-warming carbon dioxide in the atmosphere.

Even where forests remain, there’s work to be done. Water-strapped Cape Town could add almost three months’ worth to its supplies by replacing imported trees that soak up far more water than native flora. Replacing them takes just a year or two.

One way for investors to put their money to work is to buy shares in companies that are making nature-based mitigation efforts. Japan’s Suntory Beverage & Food, for example, is expanding its natural water sanctuaries by at least a third to 12,000 hectares by 2020.

Green bonds offer another option. Governments and companies alike are increasingly using the proceeds of these obligations to invest in water and forestry projects that are light on big engineering solutions. And the bonds tend to offer higher interest payments than regular debt.

Investors could simply regard nature-based investments as a hedge: the better managed forests and watersheds are, the less likely their businesses are to suffer earnings-sapping problems with water quantity and quality.

And there’s one more important, intangible benefit of these types of solutions: they come with sustainable-investing bragging rights.

First published March 22, 2018

IMAGE: REUTERS/Mike Hutchings